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‘A lot of pessimism' clouds solar Clock ticking on lawmakers, regulators as industry awaits answers on subsidy

By , - Last modified: April 16, 2012 at 9:39 AM

The solar energy industry has been a recession-proof growth engine for New Jersey, but as the industry hits its first speed bump, many in the business say they're getting nervous.

Dennis Wilson, president of the Mid-Atlantic Solar Energy Industry Association, describes the mood this way: "A lot of pessimism, mixed with a little dash of optimism here and there."

The pessimism is tied to uncertainty about the state's solar renewable energy certificate, or SREC, program, a market-based incentive that lets solar installation owners earn credits for the green power they generate. The state creates a market for those credits by establishing a renewable portfolio standard, which requires electricity suppliers in New Jersey to incorporate a set amount, which rises each year, of renewable power in their portfolios. One way the power suppliers can meet their RPS mandates is by purchasing SRECs.

The problem is the industry is growing too fast. Last year, the amount of available SRECs surpassed the amount needed to meet the RPS for the first time. That caused SREC market prices to fall from $600 to less than $150, and sent a chill through the industry. In December and January, as the lame-duck legislative session was drawing to a close, lawmakers considered a flurry of bills aimed at reviving the SREC market, but none gained the momentum needed to become law.

Since then, little has happened.

"My sense is there's no consensus yet," said Bob Marshall, executive director of the New Jersey Energy Coalition. "There are a lot of different camps within the solar business."

And the answer may not come from the Legislature at all, he said, as "there are two distinct tracks. One is legislative, and there's obviously the regulatory process."

Board of Public Utilities Commissioner Jeanne Fox believes the regulatory pathway is best. She was the BPU's president when SRECs were created in 2007, and said the agency has done a good job overseeing the industry since then. "My strong preference would be to let the board continue to do that, working with all the stakeholders to improve our current program and make modifications that are beneficial to the industry and the ratepayers of the state," she said. "I think we have the legal authority to do that under the current statutes."

Marshall thinks legislators will take a wait-and-see approach for now, and see what the BPU comes up with. Compounding the difficulty, the Legislature may be too focused on the budget right now to pay too much attention to solar, he said.

One way the board could stabilize SREC prices is by encouraging the state's utilities to enter into more long-term solar SREC contracts. Three of the state's utilities already use such programs, by which utilities help finance solar projects in exchange for a long-term fixed price on the SRECs generated by the project.

There appears to be wide agreement that one fix could be to simply accelerate the RPS schedule, thereby introducing a spike in demand for SRECs. Such a change could presumably come from either the BPU or the Legislature; Ken Long, CEO at Solular LLC, in Marlton, said an RPS adjustment would be sufficient to stabilize the market.

The ultimate goal, he said, must be to wean the industry off incentives.

Another part of the debate is how to deal with solar farms, which can flood the SREC market and, in some cases, use up land that would otherwise be open space or farms. In his energy master plan, Gov. Chris Christie indicated a preference for using brownfields and landfills as sites for solar projects, but those projects tend to be more expensive than greenfield projects.

Michael Torpey, managing partner at the Trenton lobbying firm AFT Associates, said Christie has made it clear he'd like legislation to include some sort of review process for new solar, which would give the administration the ability to weed out some projects.

"That being said, there are issues as to who will that (process) apply to," Torpey said, "what size and what type of projects, and should there be an exemption for those already significantly down the development pipeline."

A size limit also could upset electrical unions, which crave the steady work large-scale projects can bring.

Meanwhile, the solar industry has already seen contraction. Earlier this year, the state's largest solar firm, Trinity Solar, laid off 80 of its 400 employers. Company representatives attributed the layoffs to delays in some larger projects, but said they expect to hire back the affected staffers — all installers — soon.

Wilson, who also owns the solar development firm Renewable Power Inc., in Parsippany, said he's heard the Legislature may take up the solar issue in May, passing a bill sometime in June, which marks the beginning of the next energy year. He said the Legislature shouldn't delay.

"There needs to be a bill — and the sooner the better, because then that will give the market some confidence," he said. "Otherwise the industry is really going to go through dramatic shrinkage."

E-mail to: jkaltwasser@njbiz.com
On Twitter: @JaredKaltwasser

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